Data Centers: Boom Amid Bottlenecks

Data centers have become the most capital-hungry asset class in commercial real estate almost overnight. Capital markets have embraced the sector, construction pipelines are full, and deal volume continues to set records. In 2025 alone, data center transactions surpassed $60 billion, fueled by AI adoption, hyperscaler expansion, and the global race to secure digital infrastructure.

Institutional acceptance is no longer in question. Securitized issuance tied to data centers has surged from less than $400 million annually pre-2021 to nearly $3.7 billion year-to-date in 2025, while cap rates have stabilized around 6.5%, reflecting investor confidence in durable cash flow and long-term demand.

Yet beneath the headlines, a more complicated reality is emerging. While demand remains real and structural, data centers may be scaling faster than the physical, environmental, and political systems that support them.

The result is not a classic oversupply story—but a market defined by bottlenecks.

Capital Is Abundant. Infrastructure Is Not.

From a pure demand perspective, the bull case remains intact. Data center REIT executives have emphasized that the sector is not in an oversupply state nationally, particularly in core markets where vacancy remains tight and pre-leasing is common. AI workloads are accelerating faster than forecast, and institutional capital continues to flow at scale.

But data centers are no longer just real estate. They are infrastructure.

AI’s growth has triggered what many analysts describe as a “real merge”—the convergence of commercial real estate, energy infrastructure, and capital markets. The value of a data center today is increasingly determined not by square footage, but by megawatts secured, grid access, and long-term power commitments.

Read the full article from Coldwell Banker Realty.